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HomeMy WebLinkAbout09.07.21 Work Session Minutes CITY OF FARMINGTON CITY COUNCIL MINUTES WORK SESSION SEPTEMBER 7,2021 Call to Order Mayor Hoyt called the work session to order at 5:45 p.m. Roll Call Present-Hoyt, Bernhjelm, Pearson, Porter and Wilson Absent-None Also Present-Administrator McKnight,Assistant City Administrator Gorski, Finance Director Regis, Parks and Recreation Director Omlid and Assistant Fire Chief Albee. Agenda Motion by Wilson,second by Bernhjelm,to approve the agenda as presented.APIF, motion carried. Fire Relief Association Request Fire Relief Association President Albee appeared before the city council to both explain how the Farmington Fire Department Relief Association (FFRA)operates and to ask for an increase in the pension contribution for 2022. The FFRA is requesting an increase in the annual pension contribution from$6,500 per year to$7,500 per year. The FFRA had a funding status of 152% at the end of 2020 and it is estimated to be at 180% funded today. If the requested increased was awarded,the FFRA estimates the funding status would be at 142%. Councilmember Wilson stated he was comfortable with the request and asked how financial projections were used to determine their funding status. Albee shared that it was assumed that all members would be paid out 100% based on their years of service if all payouts had to be made today. Wilson asked how the FFRA looks at the market in the future. Albee stated that the FFRA uses its own financial advisor and has to follow investment rules established by the state. Wilson asked Administrator McKnight how he felt about the request. McKnight stated he is in support of the increase and has watched how the FFRA board has changed over the years to set itself up for long-term success. Mayor Hoyt asked what the increase in funding status to 180%was a result of. Albee stated it was the stock market. The consensus of the city council was to support the requested increase effective January 1, 2022. 2022 Budget Update Administrator McKnight provided an update on the 2022 budget development. The city council discussed the 2022 General Fund budget and tax levy at work session in July, August and September 2021. The city council discussed matching the three priorities that were set for 2021 and 2022 represented in any growth in the tax levy. The three priorities set by the city council include- 1. Business Growth 2. Community Engagement 3. Infrastructure Support During the budget work session discussions, the city council asked that any increase in the tax levy be focused on the priorities set by the city council and as visible as possible to the community. The proposed budget and tax levy are shown below- 2021 Budget 2022 Proposed Increase Budget (Decrease) Revenues $3,298,344 $3,711,583 12.53% Expenditures $13,832,464 $15,829,719 14.44% Fiscal Disparities $2,277,659 $2,351,400 3.24% General Fund Levy $8,256,461 $9,766,736 18.29% Debt Levy $3,012,093 $ 2,265,788 (24.78%) Net Tax Levy $11,268,554 $12,032,524 6.78% General Fund Revenues Revenues have continued to move in a positive direction overall since the start of the pandemic. The current draft of the budget has revenues at$3,711,583 which represents a 12.53% increase over 2021. The General Fund has revenues outside of the tax levy. These revenues come from a variety of sources shown below. 2021 Budget 2022 Proposed Increase Budget (Decrease) Licenses and Permits $517,076 $736700 42.47% Intergovernmental Revenue $667,912 $672,087 0.63% Charges for Service $576,197 $602,460 4.56% Fine and Forfeitures $49,000 $50,000 2.04% Investment Income $29,100 $41,600 42.66% Miscellaneous $79,370 $180,878 127.89% Transfers In $1,379,689 $1,427,858 3.49% Total Revenues $3,298,344 $3,711,583 12.53% Revenue items of note for the proposed 2022 budget include: • Permit revenue is projected to increase by$219,624. This increase is attributed both to the increased number of homes being built in Farmington and the continued permit revenue from items such as new decks, basements, bathrooms, etc. • Investment income is proposed to increase by$12,500. This is based upon our historical returns the past few years. • Miscellaneous revenue is proposed to increase by$101,508 based upon our historical average. General Fund Expenditures There have been a number of reviews and revisions in an effort to lower the overall levy increase. The proposed 2022 expenditures are summarized below- 2021 Budget 2022 Proposed Increase Budget (Decrease) Administration $902,915 $1,099,249 21.74% Human Resources $361,658 $402,112 11.19% Dakota Broadband $37,500 $45,500 21.33% Finance/Risk Management $776,287 $818,759 5.47% Police $4,845,796 $5,279,810 8.96% Fire $1,435,685 $1,592,646 10.93% Community Development $1,007,849 $1,059,182 5.09% Engineering $813,895 $850,411 4.49% Municipal Services $1,511,187 $1,609,704 6.52% Parks and Recreation $1,317,341 $1,329,737 0.94% Transfers Out $822,351 $1,742,609 111.91% Total Expenditures $13,832,464 $15,829,719 14.44% Human Resources Costs All of the budgets include estimated human resources costs based upon estimated union contract negotiations/settlements and estimates for employee benefits and workers compensation premiums. Union contract negotiations are currently underway with all four of our unions. We have also been notified that we will receive a 5%increase in our health insurance premiums for 2022. Expenditure items of note in the draft 2022 budget include- • The Administration budget includes budgeted dollars for the Assistant City Administrator position that was added in mid-2021. • The three police budgets have a variety of smaller increase that make up the majority of their proposed increase for 2022. There is a larger increase in the benefits line item that may be able to be reduced depending on the outcome of current negotiations. • The Fire budget also has a number of smaller increases that make up for their proposed increase for 2022. Two of these increases include dollars for looking at future station needs of the department and dollars to start to replace tables and chairs that are used on a regular basis. Operating Transfers The operating transfers portion of the proposed General Fund budget represents the largest dollar increase for 2022. This budget is used for a variety of items that current and previous city councils have listed as priorities, are projects that funding carries over from year to year and/or items that the city council/staff want to emphasize for a variety of reasons. The proposed 2022 General Fund Transfers budget is proposed to increase from $822,351 in 2021 to $1,742,609 in 2022. The significant increases in this budget include- • Increase in the mill and overlay line item of$318,792 to a total of$650,000 to complete the mill and overlay of Akin Road in 2022. • Trail maintenance line item increase of$65,000 to a total of$135,000 to continue to address and improve the condition of our trail system on an annual basis. • The addition of$175,000 as a portion of the first debt repayment that will be associated with the Spruce and Division Streets/Parking Lot project in 2022. • The General Fund has not had a realistic and dedicated line item for vehicle and equipment replacement for a number of years. The 2022 draft budget includes $475,000 for vehicle purchases. This is a $331,011 increase over 2021. This line item has some significant purchases lining up in future years including a grader, vac truck and more. Fiscal Disparities This is a metro wide program that is used to balance the development of commercial and industrial growth throughout the region. The city has received a preliminary estimate of the final number which includes an increase of$73,741. Debt Levy The Debt Service Fund budget provides funding for scheduled debt service and interest repayment obligations, as well as ongoing trustee, assessments, arbitrage and post-issuance compliance fees related to the city's debt. The levy includes both general obligation bonds and interfund loans. The 2022 debt levy is 24.78% lower than the 2021 debt levy. The reduction is due to paying off debt including that associated with the police station construction. Details on the debt levy obligations are included with this memo. Additional Note The city continues to make progress to reach adequate funding levels in a number of areas including pavement management, trail maintenance, building maintenance and fleet replacement. I have tried to achieve as many of the priorities that individual city councilmembers shared during work session discussions. While I think this budget achieves a lot of the priorities, in reality not all of them can be met in 2022. One item that is not yet reflected in the budget, but will be included in the final version in December is the use of the "additional" dollars we expect from the Hy-Vee assessments. In analyzing the options for the use of the dollars, I am proposing that we purchase three lawn mowers for the Parks and Recreation Department that are in need of replacement. This expenditure will use all of these potential one-time dollars and not impact the proposed tax levy. The estimated market value of the average residential property in Farmington will be $282,815 in 2022. This is up 3.95%from the 2021 average residential property. The current proposed 2022 tax levy amount would increase the city tax on the average property by$76 per year. Councilmember Wilson asked about the future fire engine replacement dollars. McKnight shared that this amount was taken out of the budget at this point. There is$50,000 that could be set aside for this purpose. Councilmember Bernhjelm reminded all that this issue was discussed,and we will still have to bond for the engine at this rate and might want to consider using these dollars elsewhere. Wilson asked about a potential cost per home to operate city government. McKnight stated that staff can look at this to see if it feasible. Wilson shared his thoughts on how to market the increase to show residents why it is needed. Councilmember Porter shared that we should consider multiple avenues when it comes to education tools for residents. Councilmember Pearson still does not think this number will go over well. We need to focus on the$76 and not the percentage. She has concerns with the permit numbers as well. Mayor Hoyt shared that he is happy we moved away arbitrary percentage numbers and are focusing on the needs that have been pushed off for years. Pearson shared that businesses are coming to Farmington,they are just not the big box businesses. The city council would like the budget presentations and information to focus on the priorities and where potential tax levy increases will impact the community. City Administrator Update Administrator McKnight updated the city council on the following items- Vita Attiva development ✓ Employee picnic scheduled for Wednesday ✓ Upcoming conference attendance Adjourn Motion by Bernhjelm,second by Porter,to adjourn the meeting at 6:29 p.m. APIF, motion carried.